Correlation Between Vanguard Growth and IShares Trust

Can any of the company-specific risk be diversified away by investing in both Vanguard Growth and IShares Trust at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vanguard Growth and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vanguard Growth Index and iShares Trust, you can compare the effects of market volatilities on Vanguard Growth and IShares Trust and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vanguard Growth with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vanguard Growth and IShares Trust.

Diversification Opportunities for Vanguard Growth and IShares Trust

-0.63

Correlation Coefficient

Vanguard Growth  IShares Trust

Excellent diversification

The 3 months correlation between Vanguard and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Growth Index and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Vanguard Growth is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vanguard Growth Index are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Vanguard Growth i.e., Vanguard Growth and IShares Trust go up and down completely randomly.

Pair Corralation between Vanguard Growth and IShares Trust

Considering the 90-day investment horizon Vanguard Growth Index is expected to generate 4.47 times more return on investment than IShares Trust. However, Vanguard Growth is 4.47 times more volatile than iShares Trust. It trades about 0.13 of its potential returns per unit of risk. iShares Trust is currently generating about -0.02 per unit of risk. If you would invest  37,511  in Vanguard Growth Index on August 30, 2024 and sell it today you would earn a total of  3,061  from holding Vanguard Growth Index or generate 8.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vanguard Growth Index  vs.  iShares Trust

Vanguard Growth Index

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth Index are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

iShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, IShares Trust is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vanguard Growth and IShares Trust

The main advantage of trading using opposite Vanguard Growth and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Growth position performs unexpectedly, IShares Trust can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in IShares Trust will offset losses from the drop in IShares Trust's long position.

The idea behind Vanguard Growth Index and iShares Trust pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.